It’s Not The Income–It’s The Spending

CNS News posted an article today about the tax revenue the government has received in the first six months of fiscal 2017 (Oct. 1, 2016 through the end of March). The government has collected $7,387,280,000 more in income tax revenue in the first six months of fiscal 2017 than were collected in the first six months of fiscal 2016.

The article reports:

The federal government also collected $547,491,000,000 in Social Security and other payroll taxes during the first six months of fiscal 2017. That is about $2,731,820,000 more than the $544,491,000,000 in Social Security and other payroll taxes (in constant 2017 dollars) that the government collected in the first six months of fiscal 2016.

Despite collecting record amounts of individual income taxes and payroll taxes, the Treasury still ran a deficit of $526,855,000,000 in the first six months of fiscal 2017. (The emphasis is mine)

No matter how much money we give them, it will never be enough. We need a budget (not continuing resolutions) that does the things that are constitutional for the federal government. All other functions need to be left for the states (as stated in the Tenth Amendment). Spending cuts are needed.

If Your State Has High Unemployment, Read This

Forbes Magazine posted a story last Tuesday about what has happened to the North Carolina economy. The change began in 2013 (just before we got here). At that point the North Carolina General Assembly was controlled by Republicans and a Republican was governor.

The article reports:

Unemployment insurance (UI) reform in North Carolina continues to be the gift that keeps on giving. The 2013 UI reform, made possible by the Republican-dominated General Assembly and Governor Pat McCrory, will enable $240 million in tax savings for state employers in 2016 alone, thanks to a UI Trust Fund that has grown to over $1 billion. In addition, the Tar Heel State’s 2013 tax reform bill will once again lower the corporate income tax rate, from 5% to 4% (it was 6.9% prior to 2013).

Please follow the link above to read the entire story, but here are a few of the highlights:

In February of that year, Governor McCrory signed a bill that reduced the maximum amount and duration of unemployment benefits to levels in line with those of neighboring states. This triggered the cutoff of long-term federal UI benefits being moved up by six months.

…Ironically, in his 2010 economics textbook, Krugman (Paul Krugman) expressed an opposing sentiment. “Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect,” wrote Krugman, explaining that granting more generous benefits “reduces a worker’s incentive to quickly find a new job.”

…Due to the reforms, however, the federal UI tax hikes were halted in 2014, and dropped back to standard rates after the debt was paid off last year. The result has been significant tax relief for job providers.

The second major change in 2013 was the recalibration of DES under the leadership of former state House Speaker pro-tempore Dale Folwell. Today, the call center answers 97% of incoming calls, up from a dismal 5%, and the average appeals process has been driven down to just 74 days from seven months.

…Today, North Carolina’s fiscal health is in far greater shape than it was in 2012, thanks to bold unemployment insurance reforms that will enable an additional $240 million in tax relief for state employers in 2016. For a roadmap to UI reform, states should look no further than North Carolina, where a crackdown on fraud has saved tax dollars and early debt repayment has enabled massive savings for job creators.

The numbers above are helping draw additional businesses and jobs to North Carolina. I like that, but I also wish that other states would follow our lead. The five-percent plus unemployment rate in America is a joke–the labor participation rate is dangerously low. I am hoping for all Americans to have a chance to find the jobs they want. Following the example set by North Carolina would be a step in that direction.

Was Obamacare About Healthcare Or Taxes ?

Reuters reported on Monday that the Internal Revenue Service has released new rules concerning dividends and capital gains as part of the 2010 healthcare law. The obvious questions here is, “What do dividends and capital gains have to do with healthcare?” Evidently more than we knew.

The article reports:

The tax affects only individuals with more than $200,000 in modified adjusted gross income (MAGI), and married couples filing jointly with more than $250,000 of MAGI.

The tax applies to a broad range of investment securities ranging from stocks and bonds to commodity securities and specialized derivatives.

The 159 pages of rules spell out when the tax applies to trusts and annuities, as well as to individual securities traders.

Released late on Friday, the new regulations include a 0.9 percent healthcare tax on wages for high-income individuals.

Please keep in mind that the AMT (Alternative Minimum Tax) was originally enacted to impact only the wealthy. As of 2011, a single person who made $48,450 was impacted by that tax. I really don’t consider $48,450 wealthy. How long will it be before the new healthcare taxes begin to impact the middle class?

The article further points out:

The IRS plans to release a new form for taxpayers to fill out for this tax when filing 2013 returns.

Oh joy.

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News That Really Does Not Make Me Happy

Bloomberg reported yesterday that incomes in America declined more in the three year expansion since 2009 than during the longest recession since the Great Depression. The ‘great recession’ in America officially ended in 2009. There is a technical definition of a recession, and according to that definition, the recession in America ended in 2009. However, the income and unemployment numbers for Americans have not improved.

The article reports:

“Almost every group is worse off than it was three years ago, and some groups had very large declines in income,” Green (Gordon Green, Sentier Research LLC.), who previously directed work on the Census Bureau’s income and poverty statistics program, said in a phone interview today. “We’re in an unprecedented period of economic stagnation.”

While gains in hourly earnings and average hours worked per week may have had “a minor mitigating effect” on income declines, they couldn’t offset a jobless rate that hasn’t fallen below 8 percent since February 2009 and a record duration of unemployment, according to the Annapolis, Maryland-based firm.

The average duration of unemployment increased to a record 41 weeks in November and remains at 39 weeks, Labor Department data show. Almost 5.2 million Americans have been out of work for at least six months.

This snapshot of the economy does not bode well for the re-election chances of Barack Obama.

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Sorting Out The Numbers In The Class Envy Promotion

It has already become obvious that one of the issues in the 2012 elections will be the evil rich who keep getting richer. Just in case you were wondering, I am not in any danger of entering that class. Anyway, we recently heard that as the rest of us are eating out less often and keeping our cars longer, the evil rich are prospering at a fantastic rate. Well, not so fast.

An article slated for tomorrow’s Wall Street Journal takes apart the numbers and reveals what has really happened to the rich under the Obama administration.

The article reports:

A recent report from the Congressional Budget Office (CB0) says, “The share of income received by the top 1% grew from about 8% in 1979 to over 17% in 2007.”

I’m not positive, but I suspect either Barack Obama or Joe Biden has referenced those numbers in recent days. If not, I am sure you can find them in sound bites from other Democrat leaders. Do you wonder why the numbers stop at 2007? There is a reason.

The article further reports:

The CBO didn’t say, although its report briefly acknowledged—in a footnote—that “high income taxpayers had especially large declines in adjusted gross income between 2007 and 2009.”

No kidding. Once these two years are brought into the picture, the share of after-tax income of the top 1% by my estimate fell to 11.3% in 2009 from the 17.3% that the CBO reported for 2007.

The article explains the different types of income the rich receive and how they are taxed. It also explains the impact of changing tax rates in various areas. Please read the entire article to understand how the Obama administration is twisting the facts in order to stir up class warfare.

The article concludes:

If Congress raises top individual tax rates much above the corporate rate, many billions in business income would rapidly vanish from the individual tax returns the CBO uses to measure the income of the top 1%. Small businesses and professionals would revert to reporting most income on corporate tax returns as they did in 1979.

If Congress raises top tax rates on capital gains and dividends, the highest income earners would report less income from capital gains and dividends and hold more tax-exempt bonds. Such tax policies would reduce the share of reported income of the top earners almost as effectively as the recession the policies would likely provoke. The top 1% would then pay a much smaller portion of federal income taxes, just as they did in 1979. And the other 99% would pay more. As the CBO found, “the federal income tax was notably more progressive in 2007 than in 1979.”

We need to cut government spending. Until we get spending under control (back to below 20 percent of the GDP as it was before President Obama took office), we will never be able to raise taxes enough to pay the cost of government. Even if we confiscated all the money and property from everyone who made more than $100,000 a year, we would still not pay off our debt or be able to stop borrowing one out of every four dollars we spend. It’s the spending, stupid.

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